According to Birendra Kumar, the newly-appointed managing director of SBI Caps, his organisation has been mandated to draw up a business restructuring plan for IA. SBI Caps has suggested that after employees have been offered the stock, the airline should offload the government stake through a private placement route. "It is only after these two routes have taken place that the company should go for a public issue", Birendra Kumar said. The entire process is likely to take a year's time.

He, however, refused to state how much the government would disinvest through the process. "That is for them todecide", he said.

Kumar said that the disinvestment plan is ready and other restructuring plans relating to business are being worked out.

The decision to appoint SBI Caps as chief consultant to the disinvestment process follows the finance minister's budget announcement about the planned stake reduction in Indian Airlines. The finance ministry then announced a plan to beef up IA's capital by injecting Rs 125 crore as equity and divesting to 49 per cent over a period of three years.

The investment bank has also been appointed as global advisor to the disinvestment process in Balco and India Tourism Development Corporation (ITDC). It will also be handling the disinvestment process in Kudremukh Iron Ore Company Ltd.

INSIGHT

Turnaround before divestment vital: There is no denying the need for a fresh infusion of funds for Indian Airlines, which the proposed employees' stock option and the subsequent private placement of equity will help fulfil. However, the government would get a betterprice if it could turn around the airline before any disinvestment. The airline would be able to do so if it can improve efficiency by route rationalisations and reductions in workforce. The management would do well to consider various options such as revenue securitisation deals and sale and leaseback of old aircraft as other alternatives for generating the working capital requirements instead of taking on fresh debt. A rapid fleet expansion plan is also vital given the high average age of IA's fleet.